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When you’re getting ready to sell your house, one of the most exciting things is figuring out how much to list it for. But a list price isn’t a guarantee of what you’ll get for your home — and the wrong list price could actually cost you money or time.
Knowing how to choose a list price for your home isn’t easy. There are a number of factors that can influence the decision, including the present market in your area, the condition of your home, and even your own sentimentality.
Picking the right listing price for your home requires expertise and, in some ways, is as much an art as it is a science. Not every seller can come up with the right number on their own, which is why a real estate agent is valuable when choosing a listing price. Often, it’s out of a seller’s hands entirely.
In this piece, we’ll discuss how to choose the right listing price when selling your home and what the process looks like before putting the house on the market.
The difference between list price and sale price
First, we need to make an important distinction. The list price is often not the same as the eventual sale price.
A list price is your targeted sale price. It’s the price that shows up on multiple listing services (MLS) and that potential buyers see when they’re considering whether or not to make an offer on your home. Basically, it’s an asking price.
The sale price is what your home actually sells for. This ultimate number could be impacted by a number of factors, including the market, competition for your house, or even just a particularly motivated buyer whose offer blows you away. Sometimes the sale price comes in lower than the list price, sometimes it comes in higher.
Who comes up with a listing price?
Coming up with a listing price is a collaboration between the seller and their real estate agent. However, as some sellers struggle to remain objective about something as sentimental as a home, it’s often better to leave the listing price in the hands of an agent.
An agent has access to extensive amounts of data to help make an informed decision. They’ll have a read of the current market, sales histories of homes in the neighborhood, and be able to make a comparative market analysis (CMA) to identify a list price that will thread the needle of both attracting interest and keeping the seller happy.
Of course, a house will never go on the market without the seller’s final approval of the list price. That said, it’s usually best to trust your agent’s calculus rather than insist on your own.
What factors impact a listing price?
A listing price isn’t a hard-and-fast thing. You can change it over time, but it doesn’t look good when you lower your listing price. That makes buyers wonder if there’s something wrong with the house that’s preventing a seller from getting what they want for it. So, as a seller, you should be aware of the factors that could inform your listing price — and the ultimate sale price.
By far the most important factor in determining a listing price is the market. Buyers set market value, but that doesn’t mean you can’t use the competition to help you set the right list price. This is where a real estate agent is especially valuable.
A good agent can help identify competing list prices in the neighborhood or general area so you know what people are asking for similar homes. A thorough report will also include how long those homes took to sell, so you’ll know exactly how attractive the listing price was.
All of these insights are valuable and can help you land on the right listing price. You shouldn’t price your home higher than a nearby one that has an extra bathroom and 200 more square feet. Likewise, you probably shouldn’t price your home lower than a home that’s the same square footage but has one fewer bathroom.
Listing prices are publicly available if you want to do your own research, but sales prices may be a better barometer of how to list your home. Homes that have sold but aren’t yet closed on won’t have the sale price available. Your agent, however, may be able to pull some strings to find out the general sale price.
Knowing the market is the best asset you have when choosing the right listing price. An agent will most likely know the market better than you. Ultimately, the best listing price is the highest number that a buyer is willing to pay. Getting to that number depends on the competition and how well you’re able to leverage it.
You may think that the improvements you’ve made to your house will pay off in a listing price. That’s not necessarily true, however. Very few homes return 100% of home improvement investments and that rate of return declines over time.
Older homes can benefit from both major and minor touches like new floors, or new finishes or faucets. Upgrades to newer homes, though, are more subject to personal taste. Installing granite kitchen counters may have been important to you, but a buyer may prefer quartz. Naturally, they’re not going to pay more for that feature, which should figure into the listing price calculus.
Significant, general improvements like adding a second floor or a new bathroom are more likely to positively impact your list price. Everybody values more square footage or having an extra bathroom.
Basically, don’t assume the money you put into home improvements is all going to come back in a sale. Just because you invested $50,000 on a project doesn’t mean you should add $50,000 to your listing price.
You can’t move your house, of course, but location plays an important role in determining the right listing price. A home on a busy, dangerous street may sell for significantly less than one in a quaint neighborhood cul-de-sac, even if they’re physically comparable. On the flip side, proximity to restaurants, nightlife, quality schools, public transit, or parks could give your listing price a boost.
You may be tempted to get an official home appraisal to fully understand the value of your home. Most of the time, this is a bad idea for sellers. Appraisals are a buyer tool that the bank uses to determine how large of a loan it will approve for this particular house. You don’t need to let the buyer know that your home is “worth” less than you want for it.
Home appraisals don’t consider market conditions nearly as much as buyers and agents do and they can often be subjective to the appraiser’s personal preferences. Different appraisers may evaluate the same home in different ways and the appraisal report won’t always be in your favor. Since an appraisal may cost a few hundred dollars, it’s best to leave that to the buyer.
Believe it or not, there are “good” and “bad” times to sell a house. While there are plenty of exceptions to these rules, the most popular season for homebuying is the spring and summer. In the winter, demand tends to slow to a crawl.
There are pros and cons to selling at various times of year. In the winter, there are fewer buyers but there may also be fewer sellers to compete with. Depending on the market, you may be able to list your home for more than you would in a more competitive time. On the flip side, if there simply are no buyers, it may make more sense to take your home off the market and try again later.
In the most popular buying times, demand outstrips supply in most areas meaning you can count on bumping up your listing price. If it doesn’t draw any interest, lowering your price shouldn’t be a problem given how many buyers are looking. Still, a competitive market can be stressful and could mean navigating multiple offers. It’s a good problem to have, but still a problem.
Choosing the right listing price for your home is important. This number serves as a baseline for attracting potential buyers and, if too high, it could drive off buyers entirely. Too low, you may cost yourself money. While you have the final say in your listing price, it’s a good idea to consult with a real estate agent, get a CMA done, and use all the data available to you to pick the right price and time to list your home.